Transcript

Kat Mañalac – Hi everyone, I’m Kat Manalac. I’m one of the partners at Y Combinator, and I’m really excited to be kicking off this fireside with Kathryn Minshew and Alex Cavoulacos, Cavoulacos? Yes, yes, the cofounders of The Muse.

The Muse was a company that went through Y Combinator in winter 2012, and they’re based out of New York. So before we get started, could each of you give us a quick introduction on yourselves and The Muse.

Kathryn Minshew – And when we describe The Muse, it’s a company that’s all about helping people navigate their careers and connect with companies more authentically to find the right fit. So today, we have 50 million people every year, actually quite a bit more than that, but more than 50 million people who use themuse.com, and hundreds of the best companies around the world, from Facebook, Dropbox, Slack, to Johnson&Johnson; Capital One, Goldman Sachs that are really all about telling a more authentic story and using that to hire people who genuinely want what they’re offering. Then we have about 120 employees now based here in New York City. So both with our clients and with The Muse itself, we’ve gone through a lot of the good, bad, and ugly of hiring.

Kat Mañalac – So today, we’re going to focus on people, you know, it’s all about the people. And so, let’s talk about hiring as a force for culture. So at a high level, why is this important?

Alex Cavoulacos – This is really important both for individuals and for companies. So for companies, if you have the right people, that is what makes or breaks whether you’re gonna be successful, particularly in a startup, where you only have so many bodies to do the things that you need to do. But for an individual, you are spending more hours at work than you ever did in the past. It’s such a huge part of your identity. Especially here in New York or on the west coast, the first question you’re gonna get when you meet someone is, what do you do? And whether that is something that resonates with you, that aligns with what you want to be doing not, is actually hugely important. And so, the industry has not caught up with the changes, with the future of work, and we believe that it really needs to.

Kathryn Minshew – We also think a lot about finding the right fit for you. And I think that’s particularly important for startups because every startup is so different, right? They have different cultures than each other, they have different cultures than a large company, for sure. And I think that we live in a culture these days that’s obsessed with, you know, the best places to work list or sort of ranking companies, rating them from one to five stars. But one of our really deep beliefs is it’s all about alignment, not ratings. It’s about what is the right thing for you. And so, we’ll talk more about this, but I think when you’re a startup founder, one of the most important things you can do early on is really identify, what is the culture you’re trying to build? What are the characteristics of the company that you want to create? And how do you kind of broadcast out, you know, loud and proud so that people who want that will be drawn to your company? And people who don’t want that will say, “No thanks,” and they’ll go find somewhere else to work.

Kat Mañalac – So, let’s start with the hiring. So many people in the audience, so, how many of you have already started a startup? All right.

Kathryn Minshew – Way to go.

Alex Cavoulacos – Yeah.

Kathryn Minshew – Awesome.

Kat Mañalac – So, many of you might be thinking about hiring your first employee or your first few employees, so how do you know who the right person or, you know, first few people to bring on are?

Alex Cavoulacos – I think one of the biggest things, when you’re hiring, is you have to know what you’re looking for, and that’s a mix of skills and values. And so, you might be like, “Okay, I need a salesperson, they need to be able to close a deal,” great, but what are the values that are core to your company as well? And then, how’s your process allowing you to actually figure that out, especially early stage, especially if you haven’t really interviewed a ton prior to starting a company. A lot of people just jump into it. They’re like, they go with their gut feeling and they are like, “I think this person can do the job.” But you really actually need to set up a process. And it can be a lot less, you know, arduous in the early days than it is if you get bigger, but what are you’re gonna ask for every single person going through the process? How are you gonna compare them head to head? How are you gonna check their skills? Are you doing reference checks? You should be doing reference checks. All of those things, and actually just thinking through the process at the beginning and identifying what you want, because there are many types of salespeople, many types of marketers, many types of engineers. You don’t just want an engineer or a salesperson, you want one with a particular skill set to make your company successful.

Kat Mañalac – So, would you be willing to share some stories and mistakes you made at The Muse early on when it comes to hiring?

Kathryn Minshew – Yes. So first of all, like, we made so many mistakes in the early days when it comes to hiring. And I think one of the sort of, ever-present truths of startups is that everyone makes mistakes, you too will make mistakes, and what separates the mistakes that are painful to survivable and the mistakes that kill you is how quickly you identify them and how quickly you move to remedy them.

So I’ll give you like two examples of early Muse hiring mistakes. One was sort of not doing what Alex has just talked about and vetting for values and mission alignment when you’re hiring. So when we started The Muse, I mean, we were, like, nobody wanted to join the company, nobody wanted to fund us. I think we got a period.

So, this is a picture from after our YC interview in November 2011. And we were beaming ear to ear because it was actually the first VC pitch in months at which people hadn’t basically just laughed us out of the room. And so, you know, we were kind of very used to the only few people that were interested in working with The Muse were people that were deeply passionate about the mission and deeply aligned with the values that we had. All of a sudden, we get into YC, that news becomes public, and we have all of these people wanting to work for us. We didn’t realize a lot of them actually just wanted to work for a YC startup. They wanted to work for a company they perceived as sexy. They didn’t actually want to work for us.

So one of our first hires was an engineer. I call him Bruce, because we never hired Bruce. And he said all the right things, he seemed so passionate. He was also in San Francisco where we had just moved just to do Y Combinator. He was ready to start the next day. And so, you know, he seemed to check all the boxes. We hired him, we jumped right in. At the time, Alex now codes and has been, you know, ran product through the first like, what? Six years, five years of the business? But at the time neither of us were incredibly technical, so we thought this is a great solution. And it was great for exactly seven weeks until he shows up one morning after, I will say, I had sold $25,000 of The Muse’s first product to our early customers. And he says, “Hey, I want to talk. I want to be a co-founder. I want more money, I want more equity. I want to be the one that they talk about in Tech Crunch. And I’m not writing a single line of code until you give me these things.” Now, we’re pretty low drama. So we don’t have, like, tolerance when people bring in drama.

Alex Cavoulacos – And it’s also only a few weeks before demo day. So in terms of holding this over our head, we were really being put between a rock and a hard place.

Kathryn Minshew – And do you know, without going into all the gory details, we had a couple of quick conversations and then we’re pretty much like, “Great, well, it sounds like you should work somewhere else and we should find another person to partner with,” because obviously, that’s not an example of shared values.

And, you know, the thing is, again, like you’re gonna deal with a lot of crazy things in startups. I think we were lucky that we had the YC community who was able to hook us up with somebody else, we, you know, paid more than $25,000 of that revenue to build that early product. But we did get to a place where we were able to launch with demo day with these customers with a working product. But it was a really big lesson for us because I think there were a lot of signs early on that this person was just attracted by the shininess of a startup of YC.

That said, you can make the opposite mistake, which we did about a year later, which is get people who are so into your mission and so into what you’re doing that they don’t actually want to do the job that you’re hiring for, which again, is a real problem.

So, just a quick version of that story is that I did our early sales, right? Because, you know, when you’re five people in a room, actually, I think three or four people in a room and it’s like, “Okay, we need to go talk to customers.” Like, knows goes, it was me. So I sold our first, probably, about 35 or 40 companies who were hiring partners with The Muse. And when we needed to then hire our first salespeople, we found people who loved what we were doing. They were so passionate, they wanted to part of The Muse. They did not actually want to do sales, they did not want to do sales calls, they did not want to, you know, do cold outreach. And unfortunately, you got to do that in sales. And so, that was another painful lesson. And now I think we have just a much more thoughtful, structured hiring process, where we try and assess to the extent that it’s possible to do so, you know, how quickly can this person get up to speed, how much do they have the skills and the desire to do the role? How much are their values aligned mission line?

And the last thing I’ll say is, nobody is perfect. So, unfortunately, it’s kind of a harsh rule of thumb, but if you have, sort of, for every 10 people you’ve hired, if there’s not one person that you’re either managing out or firing, you’re probably being too soft on performance.

Kat Mañalac – Thank you.

Kathryn Minshew – And maybe more than that. That’s like really the baseline.

Kat Mañalac – So, a lot of companies have started to talk about diversity and inclusion. So what is one thing that founders in the audience can do to, sort of, improve what they’re doing in that space?

Alex Cavoulacos – Great question. So, one of the things I have actively played against is the notion of sort of culture-fit-interviewing. I do think there’s, you know, culture and different ways to think about how culture evolves. But culture fit, especially for people who are not skilled interviewers, who have not done it for a long time, is an amazing cause for bias.

Kat Mañalac – Can you talk a little bit about what culture-fit-interviewing is?

Alex Cavoulacos – Yeah. So, often in an interview process, someone will meet and the question and say, “Will this person be a good fit for our company?” So they’ll go and they’ll interview them, they’ll talk to them, they’ll come out of it, they’ll be like, “Yes, this person is a culture fit, or no, this person is not culture fit.” And if you have not, as a founder, identified actually what culture fit means, what you get is, is this someone I’m comfortable around? Would I hang out with them?

Kat Mañalac – [crosstalk 00:09:56]

Alex Cavoulacos – Right? And so, you not only find bias against. I found both in terms of introverted people, oftentimes, interview less well for culture fit. But also, any sort of community of color if you’re white team, any sort of women if you’re a male team, whatever you are, you look and you’re more comfortable with people who are like you, who have your background, who joke about the same movies, who travel to the same places, whatever that might be. And so, when people interview at The Muse, and I hear someone, usually someone who’s newer to the company, is interviewing maybe one of their first rounds of interviews and says, “This person is not a culture fit,” I get to ask, “Great, which other values were you concerned about?” And if they can point to one of them, absolutely, let’s talk about what it was that came up in the interview that made them wonder. But if they can’t point to it, then that actually, I don’t care. The fact that you didn’t click with them is not a pre-req. The fact that you’re not good friends and want a buddy-buddy up with them is not a pre-req to work here. I often have to tell very extroverted people being extroverted is not a pre-req to work here because that’s often a place where you will find bias.

The other thing I would say is starting day one and really valuing that and putting that into your process because the larger the company gets, the harder it is to change the culture, the harder it is to become inclusive, if you’re not, the harder it is to become more diverse. I have a more diverse team, which breeds success. There’s so much research on it. And so, if you are truly committed to it from the beginning, that’s actually a competitive advantage.

Kat Mañalac – So, you’ve both talked a lot about how important culture and values alignment is for people who work within your company, but what about people that you work with, you know, that are external to your company? So investors that you might bring on or partners. Talk to me a little bit about that.

Kathryn Minshew – Yeah, I think shared values is just as important for the people outside your company than in it. And it’s always been really important to Alex and I, because, you know, we started a company together before The Muse that failed really painfully, like in a ball of flames because of co-founder issues.

Alex Cavoulacos – Really does.

Kathryn Minshew – And because…yeah, of a total lack of shared sort of values and ethics. And I love when Jessica said, “You know, find someone who has a similar moral compass,” because you might think like, “Oh, we can make it work.” But like, “Oh my God, no.”

Alex Cavoulacos – You cannot make it work.

Kathryn Minshew – Exactly. I mean, we’ve even held the shared values tests to clients. We actually have. We’ve had a couple of clients. And one, in particular, I think of right now that we ended up firing a client for just not working well, and treating people well and sort of did what you would do is have a conversation, give the feedback, say, “This is unacceptable” You get the, “Absolutely, I totally understand. I won’t do it again.” They did it again, we returned their money, and decided not to work with them. And it’s a hard thing to do, but I think values are only so important, and only are real if they’re difficult choices.

Alex Cavoulacos – Yeah. And on top of that, I think one of the most challenging things for early-stage founders is to think about how that implies to your investors, because, you know, I wish that the early Muse Company had lived in a world where we got to pick and choose all of our investors. We’re actually very lucky. In our series A and our series B, we had multiple term sheets, we had a lot of different options. And so for those, I did eight different reference checks on all of the investors that I was seriously considering to lead both of those rounds. And I was really happy with the people we were able to pick. But for our seed round, I was basically like walking around New York and Silicon Valley like Oliver Twist being like, “Please sir, can I have more.” I mean, really, if we are.

Kat Mañalac – It doesn’t matter how small the check is, we’ll take it.

Kathryn Minshew – Yeah. We raised our first $1.2 million. It took over a year, took about 13 or 14 months. We had one 300K check size, two 100K checks, and the remaining, what is that? Like $700,000 was basically made of like 50K, 25K, 10K. It was brutally hard. And we actually faced a really interesting situation, which some people might know about, where we had an investor who actually was a seed investor in 2012, who came back in 2013, offered to write us a huge check, and right at the end of the process, basically propositioned me for sex. So, we had to, you know, sit there. And the way that process had gone, the other fund had drawn it out so that we were actually down to about two months left of cash. When we got the term sheet, we had like…

Alex Cavoulacos – We had plenty of time…

Kathryn Minshew – Six months left of cash. We had multiple options. We had signed a term sheet, we were, you know, down at the kind of we thought the money was to be wired into our account any day and we ultimately made the decision to walk away from that entirely. Through literally a miracle, I raised $750,000 in five weeks.

Kat Mañalac – From scratch.

Kathryn Minshew – Honestly, I don’t think I could do that again.

Alex Cavoulacos – We don’t recommend it.

Kathryn Minshew – Yeah, thank you, yeah, it was surreal. But I think that also made me a really even more passionate advocate for shared values with everyone I work with, and actually was really powerful in, gosh, earlier this year, like, March or so to be able to talk about it in Fortune. And the guy ended up stepping down from his post because it turns out he was literally doing it to someone six months before the article came out, same old thing. And I think, you know, that’s why it’s not only important to make those decisions on who you work with, but I actually think when people really cross the line, it’s also important to stand up and tell others because, you know, that’s the only way that we’re gonna change the industry.

Kat Mañalac – Thank you for sharing that story. I mean, I think it is really important. And so many stories have come out in the past year, and I’m so grateful to all the women, and you included, that have been brave enough to do that because I’m sure there are so many more stories out there. And hopefully, you’re helping, you know, bring forth the future where this doesn’t happen to anyone. So, we are almost out of time. We have a couple minutes left. But to wrap it up, let’s talk about one blind spot that you think every early-stage founder should be aware of as their company grows.

Alex Cavoulacos – Yeah. So I think one of the things that has been most fascinating to me because we’re now 120 people, six years old, is in the early days, you sort of understand that your culture is kind of an average of your personalities, of your values, sort of as founders, how much of an influence you have. And then, as our company grew, I think we genuinely believe, like now there’s so many more people that influence it. And then as we got even bigger, we realized, nope, that’s still true, for better and for worse.

The things that I’m proud of about us, I think, are such a huge part of our culture to draw and people can identify just walking into the room, but also the things that we’ve had to work on as founders. Things that are our own personal weak spots are things that are also weak spots for the company. And so, as you not just hire, but think about how you grow as a company, take those into account because you will be such a huge influence on your company, not just when it’s small, but throughout the entire lifetime.

Kathryn Minshew – Yeah, and I’ll give you an example of that, which is, you know, I think that when Alex and I started The Muse, we really wanted to build a company that treated people with respect. We have very strong no-assholes-culture that we hire, fire, and promote against. But personally, I struggled in the early days of The Muse a lot with giving candid direct feedback. And I’ve worked on that. I’ve gotten a lot better. What is it “Radical Candor” great book if you too suffer this affliction. But it is really humbling and also really painful to all of a sudden look around and realize you have a 90-person company that is collectively bad at giving direct honest feedback because you personally are bad at it, and somehow that’s just replicated and more is to self across an organization. It’s much harder to change 90 people than it is to change yourself. And so, I can’t tell you how many things. You can look at it The Muse right now, and you can trace a lot of the good things but you can also trace a lot of the challenges to things that, you know, maybe we weren’t as good at personally. And I think that the more you’re aware of that, the easier it is to actively have other people say, “You know, look, this is something I’m good at, can you help me counteract this in our culture? Can you help me make sure that we don’t build a team that suffers the same flaw at scale.”

Alex Cavoulacos – The one other thing I’d say in terms of a…can be a blind spot. And, you know, seeing rooms like this, and having so many more female founders than they were when we started The Muse, hopefully, will change this. But know that you can start a company that is the reflection of what you wanna build and doesn’t have to be what everyone else is building in terms of what you do, how you do it, how you approach it. If there’s such a range. And there’s companies in New York that we know well who’ve grown really quickly. I’m like, “Wow, I have no idea how they’re growing so fast.” And then, I get to learn more about the inside and I’m horrified, I’m like I would never run that company. And you know what? You do you but the way that you want to do it, I think is okay, right? And staying true to who you are, there are people who are going to wanna work as part of that and be a part of that culture, and that’s gonna be refreshing compared to a lot of other environments. So don’t let the sort of mod model that you know be the one that you think you have to fit into.

Kathryn Minshew – Yeah, the rejection that Jessica was talking about. It’s not only people rejecting sometimes your idea or telling you no for funding, but it’s also people saying, “Oh, if you try and build your company like that, it’ll never work.” And, you know, we made decisions early on. We have a baby-at-work policy. In fact, Alex’s daughter is somewhere in the back.

Alex Cavoulacos – She’s in the back, yeah.

Kathryn Minshew – Probably asleep.

Alex Cavoulacos – No, she’s watching.

Kathryn Minshew – But, you know, I think we were told over and over again, like, “You can’t do that, you can’t build a company that does that and make it work.” And it does sometimes mean it’s harder. But I think that if it’s something really important to you, of course, like, learn as many lessons. We learned so much from other founders about the mistakes to avoid, how to build faster. But I also think that there’s not one right way, especially when that one right way is often, you know, a bunch of dudes basically deciding what they think, like, the best possible company is. And there’s real power in just owning what you believe is right, and then just fucking doing it.